Secret 1: The rich are not necessarily smarter than everyone else. It’s true. If you were to take a poll of every successful person in real estate (or any industry for that matter). I would bet you over half graduated in the middle of their high school class. I encourage you to attend a real estate investment club in your area. (They are everywhere, just look on the internet). Start talking with these folks and you will see that they are not walking around with a brain trust sitting on their shoulders. It will shock you how average these people can be. Don’t ever let "lack of intelligence" be your excuse for not pursuing your real estate dreams.

Secret 2: No other industry is like real estate. No other industry allows you to leverage your money the way real estate does.

A while back I was listening to an investment tape from a well known speaker, and as I was driving he said something like "real estate isn’t a good investment because it only earns nationwide about 4 percent per year". I almost ran through a red light.

And he was supposed to be an expert. I’m no mathematician or CPA, but if you consider appreciation, tax deductions for depreciation, equity buy down, and the fact that you can leverage to purchase a property, it would take a moron to come up with 4 percent (no offense to mister speaker).

Example: a $100,000 property might require $10,000 down (there definately are ways around that ?but for the sake of an example let us say that’s what we put down). Let’s say the principal we pay over the first year is $1,000 and the depreciation is $3,000. So, from a non-mathematician and non-CPA point of view what does this mean.

Okay: appreciation 4%, or $4,000

Tax write off (approximately) for depreciation = $800

Principal buy down by tenants = $1,000

This means you have earned a value of $5,800 for this property. But wait, you didn’t invest $100,000, you only invested $10,000. Therefore $5,800 for a $10,000 investment means your rate of return is 58% (please CPA’s don’t call me- I know it’s a little more complicated than that ?but you get the jest of it).

And that, my friend, is why real estate is in a class by itself.

Secret 3: Time is your ally or your enemy; use it wisely. It is called the great equalizer. Both kings and paupers have but 24 hours in each day - no one has a second more than the next person.

I want to give you just one piece of advice. Don't watch so much television! It really is that simple.

Think about it. The average American comes home and watches almost 3 to 4 hours of television per day. (I actually read it was 6 hours per day ?but I found that hard to believe so I lowered it to 3 or 4) What could you accomplish if you didn't do this?

Okay, here's one more piece of advice relative to television. Instead of giving up the shows you like, record ONLY the ones you like and watch them at a preset time.

No more of this, "...well, just one hour until the show I want is on, so I'll just watch television for an hour until it comes on." I am not suggesting you give up your entire lifestyle. Just streamline it. I think you could set aside one or two evenings a week by following that simple advice.

You can invest in real estate without severly impacting your family time. The television is one. Next comes your lunch break.

If you are working for someone else, why not go in a half hour earlier and take an hour and a half lunch to look at houses and stroll the neighborhood looking for houses.

Or why not take a half hour lunch and leave early, driving different routes home looking for houses. The deals are there, you just have to look for them.

Get up a half hour early every day and read read read educational material on real estate investing.

Secret 4: The deal of the decade comes along every week. This is a statement made by Dr. Dolf De Roos. And it is true. Go to any real estate investment club and I will prove my point. Each and everyone of them will have at least one example of a good deal of the century. The only caveat to this is you don’t find these deal by looking for a blazing neon sign ?you need to dig. Ask around. Follow up on abandoned houses. Call on rental ads. Look for frustrated out of state owners. Tell friends, neighbors, grocery baggers, and relatives what you are looking for.

Secret 5: Not all great real estate deals are sold through real estate agents. Don’t get me wrong. I am not against real estate agents by any means. But if you limit yourself to only what the agents show you, you are not just missing the boat you’re missing the whole harbor. When you first start in real estate it doesn’t seem like any deals will come your way. But trust me.

Once people start knowing you’re out there they will recommend their family and friends contact you. Heck, I even have my mail lady scouting out houses for me.

Secret 6: Not all strategies will work for all people all the time. Long term holding is much different than quick flipping property. Just to give the new person a glimps of some of the possible real estate strategies:

Lease option is a quick way to buy a house and sell it within a year to two years. With this process, you do not own the house, you have an option to buy the house at a set price by a specific time. Usually, you will have to put a renter in the property, and after a year, you (or the tenant) can do a refi loan and get in with essentially, no money down.

It works well to have the seller of the house at a low price, and your tenant to have an agreement with you to buy it at a higher price. Therefore, you would keep the spread.

Wholesale/retail is when you buy a junky house, fix it up and sell at retail price.

Longterm holding: when you want to hold a house for a long period of time (forever perhaps) and let the tenants pay it down or pay it off. Longterm can be a little more forgiving if you overpaid for the property. On the short term, if you miscalculate, you can lose your shorts!

Then there is quick flips where you put a house under contract and then assign it to someone else, usually a rehabber.

Preforeclosures. Preforeclosures are houses that have distressed owners or distressed properties. In most cases the owner just want some sort of debt relief. The result of divorce, financial difficulty, loss of job, or any number of situations.

So how do you know what is right for you? It depends on your goals. Is your plan to quit working for someone else and start a new career? Do you want to just supplement your income while working in your present field? Are you just thinking of retirement and don’t want any extra work.

Real estate can answer all of these, but in different routes. For the person who wants to go into real estate full time he/she may want to do rehabs. For the supplemental income you might want to do lease options, rehabs, and quick flips.

For long term hold, you find a house at a good price (one that will cover your mortgage payments) and you may or may not have any repairs to do. You can hold on to the property until a larger more desirable one comes along. At which point you can continue investing, using it as a 1031 exchange for larger properties, or just keep the property and receive the rental income for life.

Also, with long term holding, you can have, say 10 properties, and by the time you retire you could arrange it so they are all paid off. Then, pull out a loan on one property at a time (tax free!) each year for living expenses. Repeat the process with the first house once you get to the 10th house.

Secret 7: Real estate is cyclical. You have to be flexible. What is working like gang busters one year may not work the following. Right now in my state there is a shortage of houses in most areas, and interest rates are low nation wide. But next year may not be so. Have you studied enough to know what strategies you should use or when you should adjust? The person who isn’t flexible in this industry can get broken when the winds of change blow.

Bonus secret 8: You will never get rich trading hours for dollars. With a few exceptions, this is a true axiom. Unless you are a much in demand entertainer or high profile surgeon, you are literally trading your life (time) for money. When you trade hours for dollars you have set a limit to your income. If you work for XX amount of dollars per day it will never exceed XX times 24 hours (assuming you never want to see your family, eat, or sleep).

Part two to this secret is that the more you have others do, the more time you will have to work on your real estate deals. Hire someone to mow your lawn. Can’t you hire a high school or college student to scrub your toilet and tub, and wash your car? What is your time worth to you? I can pay a kid minimum wage to mow my lawn ?if you’re doing it yourself you’ve just saved yourself $10 bucks and used up an hour of your time. Isn’t your time worth more than $10 per hour? You need to concentrate on tasks that bring in the most money.

Brandy Eismon

free articles and resources on www.AAREIT.com

 

Do you own real estate articles or stories and want to share with other investors? 
You have chance to win $100 Amazon Gift Certificates. We will give away 3 prizes for top authors each month!

Email your articles or stories to:  articles@buyincomeproperties.com

 

© Copyright 2001 - 2010 by BuyIncomeProperties.com               

 

 

Visit Real Estate Forums for every real estate investing topics!  Enter Here

    

Top of Page